NPI PCP Sample Questions & Practice Test

Payroll Compliance Professional (PCP) preparation is about applying payroll rules consistently: employee status, pensionable and insurable earnings, taxable benefits, vacation and termination pay, remittance timing, records, and year-end reporting.

PCP exam snapshot

What PCP practice should test

• recognizing pensionable, insurable, taxable, and non-taxable payroll amounts
• applying payroll remittance, filing, and year-end reporting logic
• distinguishing payroll compliance rules from HR policy preferences
• identifying when jurisdiction, employment standards, or records change the payroll answer

Sample Exam Questions

Try these 12 original PCP sample questions. They are not official National Payroll Institute questions and do not reproduce a live exam.

Question 1

Topic: Pensionable and insurable earnings

An employer pays a regular salary plus a taxable cash bonus to an employee in insurable employment. What is the best payroll treatment?

• A. Exclude the bonus from all statutory deductions because it is discretionary
• B. Deduct income tax only and ignore CPP and EI
• C. Treat the bonus as taxable employment income and assess whether it is pensionable and insurable under the applicable rules
• D. Defer all deductions until year-end

Best answer: C

Explanation: A cash bonus is generally taxable employment income. Payroll must determine CPP pensionability, EI insurability, and income-tax withholding based on the applicable rules, not on whether the payment is discretionary.

Question 2

Topic: Taxable benefits

An employee receives an employer-paid benefit that creates a taxable benefit. What is the payroll risk if the benefit is not recorded during the year?

• A. The employee’s payroll account automatically becomes inactive
• B. The benefit becomes non-taxable because it was missed
• C. The employer can report it only if the employee asks
• D. Year-end reporting may be incomplete and deductions may be incorrect

Best answer: D

Explanation: Taxable benefits affect payroll reporting and may affect statutory deductions. Missing them can create incorrect pay-period deductions and inaccurate year-end slips.

Question 3

Topic: Remittance frequency

A payroll administrator notices that remittances are being sent using last year’s frequency even though the employer’s required frequency changed. What should happen first?

• A. Confirm the current remitter category and update the compliance calendar
• B. Ignore the change until the next tax year
• C. Stop remitting until the employer receives a penalty notice
• D. Ask employees to make the remittances personally

Best answer: A

Explanation: Remittance timing is a compliance control. The payroll team should confirm the current remitter category and align due dates, approvals, and funding steps to the current obligation.

Question 4

Topic: Record of Employment

An employee has an interruption of earnings. Why does the Record of Employment process matter?

• A. It replaces the employee’s T4
• B. It helps determine eligibility and processing for employment insurance purposes
• C. It removes the employer’s need to keep payroll records
• D. It is optional for every interruption

Best answer: B

Explanation: The Record of Employment supports employment insurance administration. It does not replace year-end reporting or remove recordkeeping obligations.

Question 5

Topic: Vacation pay

An employee earns vacation pay under employment standards. What is the safest payroll approach?

• A. Treat vacation pay as a gift outside payroll
• B. Pay vacation only if the employee resigns
• C. Process vacation pay according to the applicable employment standard, employment agreement, and payroll deduction rules
• D. Exclude vacation pay from earnings records

Best answer: C

Explanation: Vacation pay is a payroll amount tied to employment standards and employer policy. Payroll must calculate, accrue or pay, deduct, and record it according to the applicable rules.

Question 6

Topic: Province of employment

An employee lives in one province but reports to an employer establishment in another province. What should payroll review?

• A. Only the employee’s home address
• B. The province with the lowest tax
• C. The employee’s preferred province
• D. The province of employment rules used for payroll withholding and reporting

Best answer: D

Explanation: Payroll withholding depends on province-of-employment logic, not simply personal preference. The payroll team should determine the correct jurisdiction before applying deductions.

Question 7

Topic: Termination pay

A terminated employee receives final wages, vacation pay, and a retiring allowance. What is the main payroll challenge?

• A. The payment labels and rules may differ, so payroll must classify each amount correctly
• B. Every amount has the same deduction and reporting treatment
• C. Final payments are never reported
• D. Only vacation pay can be included in the final payment

Best answer: A

Explanation: Final payments can have different payroll treatments. Correct classification matters for deductions, reporting, records, and employee communication.

Question 8

Topic: Payroll records

Why should payroll keep clear earnings, deduction, benefit, and remittance records?

• A. Records are useful only for large employers
• B. Records can be discarded after each pay date
• C. Records support compliance, audit responses, employee inquiries, and year-end reporting
• D. Records replace payroll calculations

Best answer: C

Explanation: Payroll records are evidence. They support accurate reporting, audits, remittance reconciliation, employee questions, and corrections.

Question 9

Topic: Garnishments

Payroll receives a valid garnishment order for an employee. What should the payroll team do?

• A. Ignore it because payroll deductions are already complex
• B. Tell the employee’s coworkers why deductions changed
• C. Choose a deduction amount without reading the order
• D. Apply the order according to its terms while protecting confidentiality

Best answer: D

Explanation: Garnishments require careful handling. Payroll should follow the order, calculate correctly, remit as required, and protect employee privacy.

Question 10

Topic: Year-end slips

A payroll team discovers after year-end that a taxable benefit was omitted from an employee’s slip. What is the best response?

• A. Review the error, correct the reporting as required, and document the adjustment
• B. Leave the slip unchanged because the year is closed
• C. Ask the employee to ignore the difference
• D. Delete the employee from year-end reporting

Best answer: A

Explanation: Payroll errors should be corrected through the proper reporting process. Documentation helps support the correction and reduces repeat errors.

Question 11

Topic: Payroll controls

Which control best reduces the risk of unauthorized payroll changes?

• A. Allowing one user to add employees, approve changes, and release payroll without review
• B. Separating payroll data entry, approval, and release responsibilities where practical
• C. Sharing one payroll login across the team
• D. Reviewing payroll only once per year

Best answer: B

Explanation: Segregation of duties and approval controls reduce payroll fraud and error risk. Even small teams should use practical review controls.

Question 12

Topic: Off-cycle payments

An urgent off-cycle payment is needed. What should payroll prioritize?

• A. Speed only, with no record of the payment
• B. Paying the gross amount with no deductions
• C. Waiting until year-end to decide how to report it
• D. Correct authorization, deductions, records, and later reconciliation

Best answer: D

Explanation: Off-cycle payroll still needs compliance controls. The payment should be authorized, calculated, deducted, recorded, and reconciled with the regular payroll process.

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